Is Berkshire a buy?
What?s Berkshire Hathaway without Warren Buffet? Investors may not have to worry about that answer for a while. There?s apparently no truth to reports of an ailing tycoon at the helm of Wall Street?s most expensive stock. And by the way, maybe it?s not such an expensive stock right now after all. In fact at the Kiplinger Web site, Steven T. Goldberg writes for the Smart Investor column that Berkshire Hathaway may be a real bargain right now.
Berkshire Hathaway class A shares (BRK.A: news, msgs) have lost almost a third of their value in the past year, but Goldberg says most of that slide has been caused by the depressed insurance industry, the most important of Berkshire?s operating businesses, and lackluster performance of some of Buffet?s biggest blue-chip holdings like American Express (AXP: news, msgs), Coca Cola (KO: news, msgs) and Disney (DIS: news, msgs). Buffet also has about half his investment money in cash and bonds, which has hurt returns. Goldberg says now may be a good time to buy Berkshire. He says at current prices, Berkshire Hathaway is selling at 20 percent over book value, compared to the Standard & Poor?s 500 stock index which is trading at 10 times book value.
As for Geico, Berkshire?s big insurance investment, Goldberg says the company has a lower cost structure than its competitors and could see soaring profits once its marketing expenses slow. One money manager calls Berkshire a collection of good businesses with a pile of stocks, cash and bonds. Another says the stock is now trading at its lowest valuation relative to book value since 1983 and calls it a great buying opportunity. And as for Warren Buffet?s health, Goldberg says the chat room rumors are denied by Buffet?s office and friends. Read the full story
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